HPOL-B.ST — mttssn research

HOLD

Conviction: MEDIUM

A niche, capital-light polymer-compounds compounder (ROIC 10.9%, +SEK 515M EP) at a fair price — the reverse-DCF brackets the SEK 73 price at a modest ~3% implied growth. Quality at fair value; HOLD with a slight positive tilt.

Adj. ROIC

10.9%

WACC 8% → spread +2.9pp

Economic Profit

+SEK 515M

+SEK 515M; capital-light

FCF Yield

4.1%

4.1% FCF yield; funds M&A

Price / Target

SEK 73 → SEK 76

+4% base; HOLD

Revenue (LTM)

SEK 18.7B

LTM; polymer compounds

EBIT Margin

14.2%

GAAP; niche pricing power

EV / IC

1.57×

Enterprise value / invested capital

Net Debt

SEK 2.8B

SEK 2.8B; conservative

Thesis

Hexpol is a global leader in advanced polymer compounds (rubber and TPE) and engineered gaskets, a niche, capital-light, customer-embedded business with pricing power and a long M&A-driven growth record. Adjusted ROIC of 10.9% and +SEK 515M economic profit confirm genuine value creation.

The reverse-DCF fair value brackets the SEK 73 price (SEK 73 at GDP, SEK 76 at 5% growth) on a modest ~3% implied perpetual growth — fair for a steady, cash-generative compounder exposed to autos, construction and general industry.

Valuation · reverse-DCF & scenarios

Bridging adjusted NOPAT through SEK 2.8B net debt, reverse-DCF fair value runs SEK 69 (zero growth) to SEK 83 (10% growth) — bracketing the SEK 73 price. The equity is fairly valued for a 11%-ROIC niche compounder; upside depends on volume recovery and M&A.

Base SEK 76 (+4%) on modest recovery plus bolt-ons; bull SEK 86 (industrial/auto demand recovery and margin expansion); bear SEK 60 (industrial recession compresses volumes and margins).

Market-implied growth

+2.8%

NOPAT CAGR over 5y the EV already requires

No-growth value / share

SEK 69

95% of price; rest = priced-in growth

ROIC − WACC

+2.9 pp

ROIC 10.9% vs WACC 8.0% — positive = value creation

CAP (priced-in)

30.0 yrs

years of excess returns the price implies (fades to WACC)

The market pays today’s enterprise value for roughly 2.8% NOPAT growth over 5 years. The business earns 11% on capital against a 8% cost of capital (spread +2.9 pp); the no-growth value is SEK 69/share (95% of price), so the rest is priced-in growth.

Scenario	24m target	Impl. g	Upside	Prob.	Driver
Bull	SEK 86	≥10%	+18%	35%	Industrial/auto recovery + margin expansion
Base	SEK 76	+5%	+4%	40%	Fair: modest recovery + bolt-ons
Bear	SEK 60	-7%	-18%	25%	Industrial recession compresses volumes
Prob-weighted	SEK 76	—	+3%	100%	Scenario-weighted expected value

Sensitivity — fair value / share at WACC × growth

WACC \ g	0%	3%	5%	8%	10%	15%
6.50%	96	104	110	119	125	142
7.25%	81	86	90	96	101	111
8.00% (base)	69	73	76	80	83	90
8.75%	61	63	65	68	70	73
9.50%	54	56	57	58	59	61

Green = fair value above the current price of SEK 73.05. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.

Method & data. NOPAT SEK 1,939, invested capital and ROIC 10.9% are observed (adjustments.json); WACC 8.0% and terminal g 2.5% are assumptions. EV→equity uses net debt SEK 2,826. The model holds ROIC constant (no fade) over the explicit horizon; the CAP figure instead fades excess returns to WACC.

⤓ Download the full model (.xlsx) — formula-driven sheets; flex the blue input cells and the model cascades in Excel.

Key drivers

1. Niche pricing power

Customer-embedded, specialised compounds support resilient margins.

2. Capital-light model

Low capital intensity drives high returns and strong free cash flow.

3. M&A compounding

A long record of accretive bolt-on acquisitions in a fragmented industry.

4. End-market breadth

Exposure across autos, construction and general industry diversifies demand.

5. Net-cash flexibility

A conservative balance sheet supports continued acquisitions.

Key risks

Industrial cyclicalityAuto and construction demand soften in an industrial slowdown — the key swing.
Raw-material/FXPolymer feedstock costs and currency movements affect margins.
Fair valuationReverse-DCF brackets the price; limited cushion without volume recovery.
Customer concentrationSome end-customer concentration in autos creates demand sensitivity.
M&A dependenceAbove-market growth relies on continued accretive deals.

Conclusion

Hexpol is a high-quality, capital-light niche compounder at a fair price. We rate it HOLD with a slight positive tilt, medium conviction; base target SEK 76 (+4%) — accumulate on industrial weakness.

An industrial-demand pullback toward the high-SEK 60s, near the reverse-DCF floor, would be the better entry.